Pittsburgh-based Alcoa Corporation announced it had acquired the bauxite, alumina and aluminum assets of South32 Limited for $4.1 billion in cash and stock.
The agreement would give Alcoa South32’s bauxite mine, alumina refinery and aluminum smelter operations in exchange for cash and stock transactions. The deal represents an implied enterprise value of approximately $4.7 billion when including net debt. Alcoa has also agreed to provide South32 a contingent value right of up to $750 million.
“This is exactly the type of opportunity Alcoa is built to execute,” William F. Oplinger, President and Chief Executive Officer of Alcoa said. “These high-quality, globally relevant assets are a strong strategic fit within our portfolio and align directly with our strengths as a leading pure-play upstream aluminum company. With our proven operating model and global capabilities, we are well positioned to enhance performance, unlock value, and support their long-term success within Alcoa.”
The deal reinforces Alcoa’s position as a leading pure-play upstream aluminum company with an expanded portfolio of world-class bauxite, alumina and aluminum assets. Officials said the deal is expected to generate significant synergies of approximately $900 million in net present value, and is expected to be accretive to Alcoa’s earning per share and free cash flow immediately following closing. The deal also significantly enhances critical source production globally, officials said, and strengthens Alcoa’s ability to serve its customers.
“The Board is pleased to support this transaction, which we believe strengthens Alcoa’s competitive position, supports long-term earnings and cash flow growth, and creates lasting value for our shareholders,” Thomas J. Gorman, chairman of the Board of Alcoa, said. “We remain committed to the employees and stakeholders whose contributions are central to the success of these operations.”